The Battle of the Decades; Reaganomics vs. Clintonomics Is a Central Issue in 2000

By RICHARD W. STEVENSON

Published: February 8, 2000

WASHINGTON, Feb. 7—
By the reckoning of the National Bureau of Economic Research, the independent group that has the final say on these matters, the current economic expansion -- as of this month the longest on record -- dates from March 1991.

That was nearly two years before Bill Clinton took office as president. But since his two terms in the White House have largely overlapped the extended run of prosperity, Mr. Clinton and his team have not been shy about claiming their share of credit. They point in particular to the administration's record in balancing the budget, thereby keeping long-term interest rates down, stimulating business investment in efficiency-enhancing technology and creating jobs.

While deficit spending gave the economy a temporary and ultimately costly lift in the 1980's, Mr. Clinton said in an interview last week, the economy only went on a sustainable long-term growth path after he pushed a deficit-reduction package through Congress over Republican opposition in 1993.

''When we actually passed it, people could see we were serious, and I think it was just like breaking through a dam,'' Mr. Clinton said.

But by the reckoning of most Republicans, the current expansion is nothing more than an extension of a growth surge that began early in the Reagan administration. With the exception of a short, shallow recession in late 1990 and early 1991 that coincided with the Persian Gulf war, the economy has grown steadily since November 1982, driven by Reagan-era tax cuts and deregulation, they say.

To the degree that the country's improved fiscal position has helped, they say, it was only pressure from Republicans that forced Mr. Clinton to abandon big spending programs and support aggressive efforts to eliminate the deficit.

''For Bill Clinton to be taking credit for this economic boom we're experiencing is like the rooster taking credit for the sunrise,'' said Senator Trent Lott of Mississippi, the Republican majority leader.

Lawrence Kudlow, who was an economist in the Reagan administration, said the reductions in marginal income tax rates in the early 1980's and steps to free a variety of industries from price controls and other regulation ''opened the door to a tremendous entrepreneurial burst, which has gained momentum and continues.''

This current stretch of good times, however framed, clearly has many factors behind it. There have been dizzying advances in computing power and breakthroughs in new technologies. Investors have proved eager to finance even risky new ideas. The nation's work force, strengthened by a huge wave of capital spending, has become much more productive. The Federal Reserve has conducted monetary policy with skill and flexibility. The United States has benefited to some extent from the problems that have plagued much of the rest of the world.

But this is an election year, making it hard to avoid putting the economy and the longevity of this expansion in a political context.

Representing the Clinton boom is Vice President Al Gore, whose economic platform calls for a combination of fiscal conservatism and incremental government activism that is all but identical to the program pursued by Mr. Clinton.

Representing the forces of Reaganism is Gov. George W. Bush of Texas, who is running on a big tax cut intended not just to bolster economic growth but to keep politicians in Washington from frittering away the federal budget surplus on what Republicans see as costly and wasteful government programs.

Given the challenge that both front- runners face from within their own parties, especially on fiscal policy, neither camp can be assured of carrying its message into November. On the Democratic side, former Senator Bill Bradley is unapologetically calling for big spending programs to deal with big problems like child poverty and access to health care. Among the Republicans, Senator John McCain of Arizona is making a case that dealing with long-run problems like the solvency of Social Security is more important than tax cuts.

Nonetheless, to a remarkable degree, the economic policy debate this year comes down to the question of the 1980's versus the 1990's -- tax cuts and an emphasis on reducing the size and influence of federal government versus a belief that spending more on priorities like health, education and the environment can coexist with strengthening the national balance sheet.

Economists, never mind politicians, will no doubt argue the merits of both sides for decades. The importance of Washington in shaping the economy has faded in recent years. Still, some credit no doubt goes to both sides, as well as to other players, even some with otherwise poor economic records, like President Jimmy Carter.

Two things happened in the Carter administration that helped shape what came later, said William Niskanen, who was an economist in the Reagan administration and is now chairman of the Cato Institute, a conservative research group.

One was the beginning of a wave of deregulation, starting with the airline industry, that broke a long spell in which the government had steadily taken a more active role in the economy. Over the next decade it spread rapidly through industries including trucking, bus lines, energy and financial services.